Cinco v. Ca

1/16/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 603
G.R. No. 151903. October 9, 2009.*
MANUEL GO CINCO and ARACELI S. GO CINCO,

petitioners, vs. COURT OF APPEALS, ESTER SERVACIO
and MAASIN TRADERS LENDING CORPORATION,
respondents.
Civil Law; Obligations and Contracts; Payment; Under Article

1232 of the Civil Code, payment means not only the delivery of
money but also the performance, in any manner, of an obligation—
Article 1233 of the Civil Code states that “a debt shall not be
understood to have been paid unless the thing or service in which
the obligation consists have been completely delivered or rendered,
as the case may be.”—Obligations are extinguished, among others,
by payment or performance, the mode most relevant to the factual
situation in the present case. Under Article 1232 of the Civil
Code, payment means not only the delivery of money but also the
performance, in any other manner, of an obligation. Article 1233
of the Civil Code states that “a debt shall not be understood to
have been paid unless the thing or service in which the obligation
consists has been completely delivered or rendered, as the case
may be.” In contracts of loan, the debtor is expected to deliver the
sum of money due the creditor. These provisions must be read in
relation with the other rules on payment under the Civil Code,
which rules impliedly require acceptance by the creditor of the
payment in order to extinguish an obligation.
Civil Procedure; Foreclosure; Section 4, Rule 68 of the 1997
Rules of Civil Procedure on the disposition of the proceeds of sale
after foreclosure actually requires the payment of the proceeds to,
among others, junior encumbrancers in the order of their priority.
—There is nothing legally objectionable in a mortgagor’s act of
taking a second or subsequent mortgage on a property already
mortgaged; a subsequent mortgage is recognized as valid by law
and by commercial practice, subject to the prior rights of previous
mortgages. Section 4, Rule 68 of the 1997 Rules of Civil Procedure
on the disposition of the proceeds of sale after foreclosure actually
requires the payment of the proceeds to, among others, the junior
encumbrancers
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www.central.com.ph/sfsreader/session/0000016faeacfc0f69bcc36e003600fb002c009e/t/?o=False 1/16
* SECOND DIVISION.

109
in the order of their priority. Under Article 2130 of the Civil Code,
a stipulation forbidding the owner from alienating the immovable
mortgaged is considered void. If the mortgagor-owner is allowed
to convey the entirety of his interests in the mortgaged property,
reason dictates that the lesser right to encumber his property
with other liens must also be recognized. Ester, therefore, could
not validly require the spouses Go Cinco to first obtain her
consent to the PNB loan and mortgage. Besides, with the
payment of the MTLC loan using the proceeds of the PNB loan,
the mortgage in favor of the MTLC would have naturally been
cancelled.
Same; Same; Payment; Consignation; A refusal without just
cause is not equivalent to payment, to have the effect of payment
and consequent extinguishment of the obligation to pay, the law
requires the companion acts of tender of payment and
consignation.—A refusal without just cause is not equivalent to
payment; to have the effect of payment and the consequent
extinguishment of the obligation to pay, the law requires the
companion acts of tender of payment and consignation. Tender of
payment, as defined in Far East Bank and Trust Company v. Diaz
Realty, Inc., 363 SCRA 659 (2001), is the definitive act of offering
the creditor what is due him or her, together with the demand
that the creditor accept the same. When a creditor refuses the
debtor’s tender of payment, the law allows the consignation of the
thing or the sum due. Tender and consignation have the effect of
payment, as by consignation, the thing due is deposited and
placed at the disposal of the judicial authorities for the creditor to
collect.
Same; Same; Same; Same; Since payment was available and
was unjustifiably refused, justice and equity demand that
petitioners be freed from obligation to pay interest on the
outstanding amount from the time the unjust refusal took place,
they would not have been liable for any interest from the time
tender of payment was made if the payment had only been
accepted.—We also find that under the circumstances, the spouses
Go Cinco have undertaken, at the very least, the equivalent of a
tender of payment that cannot but have legal effect. Since
payment was available and was unjustifiably refused, justice and
equity demand that the spouses Go Cinco be freed from the
obligation to pay interest on the outstanding amount from the
time the unjust refusal took place; they would not have been
liable for any interest from the time tender of payment was made
if the payment had only been accepted. Under Article 19 of the

110
Civil Code, they should likewise be entitled to damages, as the

unjust refusal was effectively an abusive act contrary to the duty
to act with honesty and good faith in the exercise of rights and the
fulfillment of duty.
Same; Same; Same; Same; Damages; Moral Damages;
Exemplary Damages; Respondent’s act of refusing payment was
motivated by bad faith as evidenced by the utter lack of
substantial reasons to support it—and thus liable for moral and
exemplary damages.—Ester’s act of refusing payment was
motivated by bad faith as evidenced by the utter lack of
substantial reasons to support it. Her unjust refusal, in her behalf
and for the MTLC which she represents, amounted to an abuse of
rights; they acted in an oppressive manner and, thus, are liable
for moral and exemplary damages. We nevertheless reduce the
P1,000,000.00 to P100,000.00 as the originally awarded amount
for moral damages is plainly excessive.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
Godofredo L. Cualteros for petitioners.
Victoria G. De Los Reyes for respondents.
BRION, J.:

Before the Court is a petition for review on certiorari1
filed by petitioners, spouses Manuel and Araceli Go Cinco
(collectively, the spouses Go Cinco), assailing the decision2
dated June 22, 2001 of the Court of Appeals (CA) in CA-
G.R. CV No. 47578, as well as the resolution3 dated
January 25, 2002 denying the spouses Go Cinco’s motion
for reconsideration.
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1 Under Rule 45 of the 1997 Rules of Civil Procedure. Rollo, pp. 5-32.
2 Penned by Associate Justice Renato Dacudao (retired), with Associate
Justice Romeo Callejo, Jr., who retired as Member of this Court, and
Associate Justice Sergio Pestaño, concurring; Id., at pp. 75-84.
3 Id., at pp. 99-100.
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The Factual Antecedents

In December 1987, petitioner Manuel Cinco (Manuel)
obtained a commercial loan in the amount of P700,000.00
from respondent Maasin Traders Lending Corporation
(MTLC). The loan was evidenced by a promissory note
dated December 11, 1987,4 and secured by a real estate
mortgage executed on December 15, 1987 over the spouses
Go Cinco’s land and 4-storey building located in Maasin,
Southern Leyte.
Under the terms of the promissory note, the P700,000.00
loan was subject to a monthly interest rate of 3% or 36%
per annum and was payable within a term of 180 days or 6
months, renewable for another 180 days. As of July 16,
1989, Manuel’s outstanding obligation with MTLC
amounted to P1,071,256.66, which amount included the
principal, interest, and penalties.5
To be able to pay the loan in favor of MTLC, the spouses
Go Cinco applied for a loan with the Philippine National
Bank, Maasin Branch (PNB or the bank) and offered as
collateral the same properties they previously mortgaged to
MTLC. The PNB approved the loan application for P1.3
Million6 through a letter dated July 8, 1989; the release of
the amount, however, was conditioned on the cancellation
of the mortgage in favor of MTLC.
On July 16, 1989, Manuel went to the house of
respondent Ester Servacio (Ester), MTLC’s President, to
inform her that there was money with the PNB for the
payment of his loan with MTLC. Ester then proceeded to
the PNB to verify the information, but she claimed that the
bank’s officers informed her that Manuel had no pending
loan application with them. When she told Manuel of the
bank’s response, Manuel assured her there was money with
the PNB and promised to
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4 Id., at p. 46.
5 Id., at p. 49.
6 The net proceeds of the PNB loan were P1,203,685.17.

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execute a document that would allow her to collect the

proceeds of the PNB loan.
On July 20, 1989, Manuel executed a Special Power of
Attorney7 (SPA) authorizing Ester to collect the proceeds of
his PNB loan. Ester again went to the bank to inquire
about the proceeds of the loan. This time, the bank’s
officers confirmed the existence of the P1.3 Million loan,
but they required Ester to first sign a deed of
release/cancellation of mortgage before they could release
the proceeds of the loan to her. Outraged that the spouses
Go Cinco used the same properties mortgaged to MTLC as
collateral for the PNB loan, Ester refused to sign the deed
and did not collect the P1.3 Million loan proceeds.
As the MTLC loan was already due, Ester instituted
foreclosure proceedings against the spouses Go Cinco on
July 24, 1989.
To prevent the foreclosure of their properties, the
spouses Go Cinco filed an action for specific performance,
damages, and preliminary injunction8 before the Regional
Trial Court (RTC), Branch 25, Maasin, Southern Leyte.
The spouses Go Cinco alleged that foreclosure of the
mortgage was no longer proper as there had already been
settlement of Manuel’s obligation in favor of MTLC. They
claimed that the assignment of the proceeds of the PNB
loan amounted to the payment of the MTLC loan. Ester’s
refusal to sign the deed of release/cancellation of mortgage
and to collect the proceeds of the PNB loan were, to the
spouses Go Cinco, completely unjustified and entitled them
to the payment of damages.
Ester countered these allegations by claiming that she
had not been previously informed of the spouses Go Cinco’s
plan to obtain a loan from the PNB and to use the loan
proceeds to settle Manuel’s loan with MTLC. She claimed
that she had no explicit agreement with Manuel
authorizing her to apply the
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7 Rollo, p. 47.
8 Docketed as Civil Case No. R-2575.

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proceeds of the PNB loan to Manuel’s loan with MTLC; the

SPA merely authorized her to collect the proceeds of the
loan. She thus averred that it was unfair for the spouses
Go Cinco to require the release of the mortgage to MTLC
when no actual payment of the loan had been made.
In a decision dated August 16, 1994,9 the RTC ruled in
favor of the spouses Go Cinco. The trial court found that
the evidence sufficiently established the existence of the
PNB loan whose proceeds were available to satisfy
Manuel’s obligation with MTLC, and that Ester
unjustifiably refused to collect the amount. Creditors, it
ruled, cannot unreasonably prevent payment or
performance of obligation to the damage and prejudice of
debtors who may stand liable for payment of higher
interest rates.10 After finding MTLC and Ester liable for
abuse of rights, the RTC ordered the award of the following
amounts to the spouses Go Cinco:
(a) P1,044,475.15 plus 535.63 per day hereafter, representing loss of

savings on interest, by way of actual or compensatory damages, if
defendant corporation insists on the original 3% monthly interest
rate;
(b) P100,000.00 as unrealized profit;
(c) P1,000,000.00 as moral damages;
(d) P20,000.00 as exemplary damages;
(e) P22,000.00 as litigation expenses; and
(f) 10% of the total amount as attorney’s fees plus costs.11

Through an appeal with the CA, MTLC and Ester
successfully secured a reversal of the RTC’s decision.
Unlike the trial court, the appellate court found it
significant that there was no explicit agreement between
Ester and the spouses Go Cinco for the cancellation of the
MTLC mortgage in favor of PNB to facilitate the release
and collection by Ester of the
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9 Penned by Judge Numeriano Avila, Jr., Rollo, pp. 60-73.

10 Id., at p. 67.
11 Id., at p. 73.

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proceeds of the PNB loan. The CA read the SPA as merely

authorizing Ester to withdraw the proceeds of the loan. As
Manuel’s loan obligation with MTLC remained unpaid, the
CA ruled that no valid objection could be made to the
institution of the foreclosure proceedings. Accordingly, it
dismissed the spouses Go Cinco’ complaint. From this
dismissal, the spouses Go Cinco filed the present appeal by
certiorari.
The Petition
The spouses Go Cinco impute error on the part of the CA

for its failure to consider their acts as equivalent to
payment that extinguished the MTLC loan; their act of
applying for a loan with the PNB was indicative of their
good faith and honest intention to settle the loan with
MTLC. They contend that the creditors have the correlative
duty to accept the payment.
The spouses Go Cinco charge MTLC and Ester with bad
faith and ill-motive for unjustly refusing to collect the
proceeds of the loan and to execute the deed of release of
mortgage. They assert that Ester’s justifications for
refusing the payment were flimsy excuses so she could
proceed with the foreclosure of the mortgaged properties
that were worth more than the amount due to MTLC.
Thus, they conclude that the acts of MTLC and of Ester
amount to abuse of rights that warrants the award of
damages in their (spouses Go Cinco’s) favor.
In refuting the claims of the spouses Go Cinco, MTLC
and Ester raise the same arguments they raised before the
RTC and the CA. They claim that they were not aware of
the loan and the mortgage to PNB, and that there was no
agreement that the proceeds of the PNB loan were to be
used to settle Manuel’s obligation with MTLC. Since the
MTLC loan remained unpaid, they insist that the
institution of the foreclosure proceedings was proper.
Additionally, MTLC and Ester contend that the present
petition raised questions of fact that cannot be addressed in
a Rule 45 petition.

115
The Court’s Ruling


The Court finds the petition meritorious.

Preliminary Considerations

Our review of the records shows that there are no
factual questions involved in this case; the ultimate facts
necessary for the resolution of the case already appear in
the records. The RTC and the CA decisions differed not so
much on the findings of fact, but on the conclusions derived
from these factual findings. The correctness of the
conclusions derived from factual findings raises legal
questions when the conclusions are so linked to, or are
inextricably intertwined with, the appreciation of the
applicable law that the case requires, as in the present
case.12 The petition raises the issue of whether the loan due
the MTLC had been extinguished; this is a question of law
that this Court can fully address and settle in an appeal by
certiorari.

Payment as Mode of
Extinguishing Obligations

Obligations are extinguished, among others, by payment
or performance,13 the mode most relevant to the factual
situation in the present case. Under Article 1232 of the
Civil Code, payment means not only the delivery of money
but also the performance, in any other manner, of an
obligation. Article 1233 of the Civil Code states that “a debt
shall not be understood to have been paid unless the thing
or service in which the obligation consists has been
completely delivered or rendered, as the case may be.” In
contracts of loan, the debtor is expected to deliver the sum
of money due the creditor. These provisions must be read in
relation with the other rules on
_______________
12 See Philippine American General Insurance Company v. Pks

Shipping Company, 449 Phil. 223; 401 SCRA 222 (2003).
13 CIVIL CODE, Article 1231 (1).

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payment under the Civil Code,14 which rules impliedly

require acceptance by the creditor of the payment in order
to extinguish an obligation.
In the present case, Manuel sought to pay Ester by
authorizing her, through an SPA, to collect the proceeds of
the PNB loan—an act that would have led to payment if
Ester had collected the loan proceeds as authorized.
Admittedly, the delivery of the SPA was not, strictly
speaking, a delivery of
_______________
14 The pertinent provisions of the Civil Code on Payment are:

Art. 1235. When the obligee accepts the performance, knowing its
incompleteness or irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
Art. 1236. The creditor is not bound to accept payment or
performance by a third person who has no interest in the fulfillment of the
obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of
the debtor, he can recover only insofar as the payment has been beneficial
to the debtor.
Art. 1238. Payment made by a third person who does not intend to
be reimbursed by the debtor is deemed to be a donation, which requires
the debtor’s consent. But the payment is in any case valid as to the
creditor who has accepted it.
Art. 1244. The debtor of a thing cannot compel the creditor to receive
a different one, although the latter may be of the same value as, or more
valuable than that which is due.
In obligations to do or not to do, an act or forbearance cannot be
substituted by another act or forbearance against the obligee’s will.
Art. 1248. Unless there is an express stipulation to that effect, the
creditor cannot be compelled partially to receive the prestations in which
the obligation consists. Neither may the debtor be required to make
partial payments.
However, when the debt is in part liquidated and in part unliquidated,
the creditor may demand and the debtor may effect the payment of the
former without waiting for the liquidation of the latter.

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the sum of money due to MTLC, and Ester could not be

compelled to accept it as payment based on Article 1233.
Nonetheless, the SPA stood as an authority to collect the
proceeds of the already-approved PNB loan that, upon
receipt by Ester, would have constituted as payment of the
MTLC loan.15 Had Ester presented the SPA to the bank
and signed the deed of release/cancellation of mortgage, the

delivery of the sum of money would have been effected and
the obligation extinguished.16 As the records show, Ester
refused to collect and allow the cancellation of the
mortgage.
Under these facts, Manuel posits two things: first, that
Ester’s refusal was based on completely unjustifiable
grounds; and second, that the refusal was equivalent to
payment that led to the extinguishment of the obligation.

a. Unjust Refusal to Accept Payment

After considering Ester’s arguments, we agree with
Manuel that Ester’s refusal of the payment was without
basis.
Ester refused to accept the payment because the bank
required her to first sign a deed of release/cancellation of
the mortgage before the proceeds of the PNB loan could be
released. As a prior mortgagee, she claimed that the
spouses Go Cinco should have obtained her consent before
offering the properties already mortgaged to her as security
for the PNB loan. Moreover, Ester alleged that the SPA
merely authorized her to collect the proceeds of the loan;
there was no explicit
_______________
15 We apply here, by parity of reasoning, the principle adopted in

payment using mercantile documents. Payment by means of mercantile
documents like checks and promissory notes in lieu of the sum of money
due does not extinguish the obligation until they have been accepted and
cashed by the creditor. See Crystal v. Court of Appeals, 159 Phil. 557; 62
SCRA 501 (1975).
16 The PNB’s officers testified that had the required document (deed of
release/cancellation of mortgage) been submitted, the bank could have
released the loan proceeds. Rollo, p. 81.

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agreement that the MTLC loan would be paid out of the

proceeds of the PNB loan.
There is nothing legally objectionable in a mortgagor’s
act of taking a second or subsequent mortgage on a
property already mortgaged; a subsequent mortgage is
recognized as valid by law and by commercial practice,
subject to the prior rights of previous mortgages. Section 4,
Rule 68 of the 1997 Rules of Civil Procedure on the

disposition of the proceeds of sale after foreclosure actually
requires the payment of the proceeds to, among others, the
junior encumbrancers in the order of their priority.17 Under
Article 2130 of the Civil Code, a stipulation forbidding the
owner from alienating the immovable mortgaged is
considered void. If the mortgagor-owner is allowed to
convey the entirety of his interests in the mortgaged
property, reason dictates that the lesser right to encumber
his property with other liens must also be recognized.
Ester, therefore, could not validly require the spouses Go
Cinco to first obtain her consent to the PNB loan and
mortgage. Besides, with the payment of the MTLC loan
using the proceeds of the PNB loan, the mortgage in favor
of the MTLC would have naturally been cancelled.
We find it improbable for Ester to claim that there was
no agreement to apply the proceeds of the PNB loan to the
MTLC loan. Beginning July 16, 1989, Manuel had already
expressed intent to pay his loan with MTLC and thus
requested for an updated statement of account. Given
Manuel’s express intent of fully settling the MTLC loan
and of paying
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17 SEC. 4. Disposition of proceeds of sale.—The amount realized from

the foreclosure sale of the mortgaged property shall, after deducting the
costs of the sale, be paid to the person foreclosing the mortgage, and when
there shall be any balance or residue, after paying off the mortgage debt
due, the same shall be paid to junior encumbrancers in the order of their
priority, to be ascertained by the court, or if there be no such
encumbrancers or there be a balance or residue after payment to them,
then to the mortgagor or his duly authorized agent, or to the person
entitled to it.

119
through the PNB loan he would secure (and in fact

secured), we also cannot give credit to the claim that the
SPA only allowed Ester to collect the proceeds of the PNB
loan, without giving her the accompanying authority,
although verbal, to apply these proceeds to the MTLC loan.
Even Ester’s actions belie her claim as she in fact even
went to the PNB to collect the proceeds. In sum, the
surrounding circumstances of the case simply do not
support Ester’s position.

b. Unjust Refusal Cannot be Equated to Payment

While Ester’s refusal was unjustified and unreasonable,
we cannot agree with Manuel’s position that this refusal
had the effect of payment that extinguished his obligation
to MTLC. Article 1256 is clear and unequivocal on this
point when it provides that—
“ARTICLE 1256. If the creditor to whom tender of payment

has been made refuses without just cause to accept it, the
debtor shall be released from responsibility by the consignation of
the thing or sum due. [Emphasis supplied.]”
In short, a refusal without just cause is not equivalent to

payment; to have the effect of payment and the consequent
extinguishment of the obligation to pay, the law requires
the companion acts of tender of payment and consignation.
Tender of payment, as defined in Far East Bank and
Trust Company v. Diaz Realty, Inc.,18 is the definitive act of
offering the creditor what is due him or her, together with
the demand that the creditor accept the same. When a
creditor refuses the debtor’s tender of payment, the law
allows the consignation of the thing or the sum due. Tender
and consignation have the effect of payment, as by
consignation, the thing due is deposited and placed at the
disposal of the judicial authorities for the creditor to
collect.19
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18 416 Phil. 147; 363 SCRA 659 (2001).

19 CIVIL CODE, Article 1258.

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A sad twist in this case for Manuel was that he could not
avail of consignation to extinguish his obligation to MTLC,
as PNB would not release the proceeds of the loan unless
and until Ester had signed the deed of release/cancellation
of mortgage, which she unjustly refused to do. Hence, to
compel Ester to accept the loan proceeds and to prevent
their mortgaged properties from being foreclosed, the
spouses Go Cinco found it necessary to institute the
present case for specific performance and damages.

c. Effects of Unjust Refusal

Under these circumstances, we hold that while no
completed tender of payment and consignation took place
sufficient to constitute payment, the spouses Go Cinco duly
established that they have legitimately secured a means of
paying off their loan with MTLC; they were only prevented
from doing so by the unjust refusal of Ester to accept the
proceeds of the PNB loan through her refusal to execute
the release of the mortgage on the properties mortgaged to
MTLC. In other words, MTLC and Ester in fact prevented
the spouses Go Cinco from the exercise of their right to
secure payment of their loan. No reason exists under this
legal situation why we cannot compel MTLC and Ester: (1)
to release the mortgage to MTLC as a condition to the
release of the proceeds of the PNB loan, upon PNB’s
acknowledgment that the proceeds of the loan are ready
and shall forthwith be released; and (2) to accept the
proceeds, sufficient to cover the total amount of the loan to
MTLC, as payment for Manuel’s loan with MTLC.
We also find that under the circumstances, the spouses
Go Cinco have undertaken, at the very least, the equivalent
of a tender of payment that cannot but have legal effect.
Since payment was available and was unjustifiably
refused, justice and equity demand that the spouses Go
Cinco be freed from the obligation to pay interest on
the outstanding

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amount from the time the unjust refusal took place;20

they would not have been liable for any interest from the
time tender of payment was made if the payment had only
been accepted. Under Article 19 of the Civil Code, they
should likewise be entitled to damages, as the unjust
refusal was effectively an abusive act contrary to the duty
to act with honesty and good faith in the exercise of rights
and the fulfillment of duty.
For these reasons, we delete the amounts awarded by
the RTC to the spouses Go Cinco (P1,044,475.15, plus
P563.63 per month) representing loss of savings on
interests for lack of legal basis. These amounts were
computed based on the difference in the interest rates
charged by the MTLC (36% per annum) and the PNB (17%
to 18% per annum), from the date of tender of payment up
to the time of the promulgation of the RTC decision. The
trial court failed to consider the effects of a tender of

payment and erroneously declared that MTLC can charge
interest at the rate of only 18% per annum—the same rate
that PNB charged, not the 36% interest rate that MTLC
charged; the RTC awarded the difference in the interest
rates as actual damages.
As part of the actual and compensatory damages, the
RTC also awarded P100,000.00 to the spouses Go Cinco
representing unrealized profits. Apparently, if the proceeds
of the PNB loan (P1,203,685.17) had been applied to the
MTLC loan (P1,071,256.55), there would have been a
balance of P132,428.62 left, which amount the spouses Go
Cinco could have invested in their businesses that would
have earned them a profit of at least P100,000.00.
We find no factual basis for this award. The spouses Go
Cinco were unable to substantiate the amount they claimed
as unrealized profits; there was only their bare claim that
the
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20 Spouses Biesterbos v. Court of Appeals and Bartlome, G.R. 152529.

September 22, 2003, 411 SCRA 396, citing Araneta, Inc. v. De Paterno and
Vidal, 91 Phil. 786 (1952).

122
excess could have been invested in their other businesses.

Without more, this claim of expected profits is at best
speculative and cannot be the basis for a claim for
damages. In Lucas v. Spouses Royo,21 we declared that:
“In determining actual damages, the Court cannot rely on

speculation, conjecture or guesswork as to the amount. Actual and
compensatory damages are those recoverable because of
pecuniary loss in business, trade, property, profession, job or
occupation and the same must be sufficiently proved,
otherwise, if the proof is flimsy and unsubstantiated, no
damages will be given.” [Emphasis supplied.]

We agree, however, that there was basis for the award of
moral and exemplary damages and attorney’s fees.
Ester’s act of refusing payment was motivated by bad
faith as evidenced by the utter lack of substantial reasons
to support it. Her unjust refusal, in her behalf and for the
MTLC which she represents, amounted to an abuse of

rights; they acted in an oppressive manner and, thus, are
liable for moral and exemplary damages.22 We nevertheless
reduce the P1,000,000.00 to P100,000.00 as the originally
awarded amount for moral damages is plainly excessive.
We affirm the grant of exemplary damages by way of
example or correction for the public good in light of the
same reasons that justified the grant of moral damages.
As the spouses Go Cinco were compelled to litigate to
protect their interests, they are entitled to payment of 10%
of the total amount of awarded damages as attorney’s fees
and expenses of litigation.
WHEREFORE, we GRANT the petitioners’ petition for
review on certiorari, and REVERSE the decision of June
22, 2001 of the Court of Appeals in CA-G.R. CV No. 47578,
as well as the resolution of January 25, 2002 that followed.
We
_______________
21 398 Phil. 400; 344 SCRA 481 (2000).

22 CIVIL CODE, Articles 2220 and 2232.

123
REINSTATE the decision dated August 16, 1994 of the

Regional Trial Court, Branch 25, Maasin, Southern Leyte,
with the following MODIFICATIONS:
(1) The respondents are hereby directed to accept
the proceeds of the spouses Go Cinco’s PNB loan, if
still available, and to consent to the release of the
mortgage on the property given as security for the
loan upon PNB’s acknowledgment that the proceeds
of the loan, sufficient to cover the total indebtedness
to respondent Maasin Traders Lending Corporation
computed as of June 20, 1989, shall forthwith be
released;
(2) The award for loss of savings and unrealized
profit is deleted;
(3) The award for moral damages is reduced to
P100,000.00; and
(4) The awards for exemplary damages,
attorney’s fees, and expenses of litigation are
retained.
The awards under (3) and (4) above shall be deducted from
the amount of the outstanding loan due the respondents as
of June 20, 1989. Costs against the respondents.

SO ORDERED.
Carpio-Morales** (Acting Chairperson), Corona,***

Nachura**** and Abad, JJ., concur.
Petition granted, judgment and resolution reversed.

Decision of Regional Trial Court of Maasin, Southern Leyte,
Br. 25 reinstated with modifications.
_______________
** Designated Acting Chairperson of the Second Division per Special

Order No. 690 dated September 4, 2009.
*** Designated additional Member of the Second Division per Special
Order No. 718 dated October 2, 2009.
**** Designated additional Member of the Second Division per Special
Order No. 730 dated October 5, 2009.

124
Note.—Consignation is the deposit of the proper amount

with a judicial authority, before whom the debtor must
establish compliance with certain mandatory requirements.
(Allandale Sportsline, Inc. vs. The Good Development
Corporation, 574 SCRA 625 [2008]).

——o0o——

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1/16/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 603

G.R. No. 151903. October 9, 2009.*

MANUEL GO CINCO and ARACELI S. GO CINCO,

Civil Law; Obligations and Contracts; Payment; Under Article

Civil Code, they should likewise be entitled to damages, as the

PETITION for review on certiorari of the decision and

The Factual Antecedents

execute a document that would allow her to collect the

proceeds of the PNB loan to Manuel’s loan with MTLC; the

(a) P1,044,475.15 plus 535.63 per day hereafter, representing loss of

9 Penned by Judge Numeriano Avila, Jr., Rollo, pp. 60-73.

proceeds of the PNB loan. The CA read the SPA as merely

The spouses Go Cinco impute error on the part of the CA

The Court’s Ruling

12 See Philippine American General Insurance Company v. Pks

payment under the Civil Code,14 which rules impliedly

14 The pertinent provisions of the Civil Code on Payment are:

the sum of money due to MTLC, and Ester could not be

and signed the deed of release/cancellation of mortgage, the

15 We apply here, by parity of reasoning, the principle adopted in

agreement that the MTLC loan would be paid out of the

Rule 68 of the 1997 Rules of Civil Procedure on the

17 SEC. 4. Disposition of proceeds of sale.—The amount realized from

through the PNB loan he would secure (and in fact

“ARTICLE 1256. If the creditor to whom tender of payment

In short, a refusal without just cause is not equivalent to

18 416 Phil. 147; 363 SCRA 659 (2001).

c. Effects of Unjust Refusal

amount from the time the unjust refusal took place;20

trial court failed to consider the effects of a tender of

20 Spouses Biesterbos v. Court of Appeals and Bartlome, G.R. 152529.

excess could have been invested in their other businesses.

“In determining actual damages, the Court cannot rely on

MTLC which she represents, amounted to an abuse of

21 398 Phil. 400; 344 SCRA 481 (2000).

REINSTATE the decision dated August 16, 1994 of the

of June 20, 1989. Costs against the respondents.

Carpio-Morales** (Acting Chairperson), Corona,***

Petition granted, judgment and resolution reversed.

** Designated Acting Chairperson of the Second Division per Special

Note.—Consignation is the deposit of the proper amount

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Carpio-Morales (Acting Chairperson), Corona,*